The Nature of Management Control Systems

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sis·tem /sistém/ n 1 perangkat unsur yg secara teratur saling berkaitan sehingga membentuk suatu totalitas: -- pencernaan makanan, pernapasan, dan peredaran darah dl tubuh; -- telekomunikasi;2 susunan yg teratur dr pandangan, teori, asas, dsb: -- pemerintahan negara (demokrasi, totaliter, parlementer, dsb); 3 metode: -- pendidikan (klasikal, individual, dsb); kita bekerja dng -- yg baik; -- dan pola permainan kesebelasan itu banyak mengalami perubahan

•ber·sis·tem v mempunyai sistem; me·nyis·tem·kan v membuat menjadi sistem; pe·nyis·tem·an n perihal menyistemkan; sistematisasi

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kon·trol n

Pengawasan; pemeriksaan; pengendalianme·ngon·trol v mengawasi; memeriksa: atasan harus selalu ~ pekerjaan bawahannya; ter·kon·trol v dapat diawasi (dikontrol): penggunaan uang negara harus ~; pe·ngon·trol n 1 alat untuk mengontrol; 2 orang yg (bertugas) mengontrol; pe·ngon·trol·an n proses, cara, perbuatan mengontrol; pengawasan; pemeriksaan

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ma·na·je·men /manajemén/ n

1 penggunaan sumber daya secara efektif untuk mencapai sasaran; 2 pimpinan yg bertanggung jawab atas jalannya perusahaan dan organisasi;

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Management Control SystemsElement of management control systems include strategic planning; budgeting; resource allocation; performance measurment, evaluation, and reward; responsibility center allocation; and transfer pricing.

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Management control is a must in any organization that practices decentralization.

Basic Concepts

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A detector or sensor is a device that measure what is actually happening in the process being controlled.

An assessor is a device that determines the significance of what is actually happening by comparing it with some standards or expectations of what should happen.

An effector (feedback) is a device that alters behavior if the assessor indicates the need to do so.

A communications network consist of devices that transmit information between the detector and the assessor and between the assessor and the effector.

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Example: You are driving a car Detectors = Your eyes Assessor = Your brain Effector = Your foot Communication network = Your nerves

system

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Boundaries of Management Control Strategy formulation is the process of

deciding on the goals of the organization and the strategies for attaining these goals.

Management control is the process by which managers influence other members of organization to implement the organization’s strategies.

Task control is the process of ensuring that specified tasks are carried out effectively and efficiently.

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Distinctions between strategy formulation and management control:

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Characteristics Strategy Formulation Management Control

System design Unsystematic, Strategic decision may be made any time

Rhythmic, predetermined procedures

Nature of information

Tailored-made to faced problems, more external and predictive, less accurate

Integrated, more internal and historical, more accurate

Communication of information

Simple Difficult

Involved people Top management and staffs

Top management and line managers

Distinctions between strategy formulation and management control:

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Characteristics Strategy Formulation

Management Control

Number of involved people

Few people Many people

Mental activity Creative and analytic Administrative and persuasive

Discipline Economics Social psychology

Time horizon Tend to long-term Tend to short-term

End products Goals, strategies Strategy implementation

Distinctions between management and task controls:

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Characteristics

Management Control

Task Control

Focus of activity The whole of operation

Individual task or transaction

Nature of information

Integrated, many financial data

Tailored-made to individual task, more non-financial data

Involved people Management Supervisor or none

Mental activity Administrative and persuasive

Follow direction or none

End products Strategy implementation

Tasks are carried out effectively and efficiently

Distinctions between management and task controls:

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Characteristics Management Control Task Control

Mental activity Administrative and persuasive

Follow direction or none

Discipline Social psychology Economics, physics

Time horizon Weekly, monthly, annually

Daily

Type of cost Discretionary costs Engineered costs

Examples of decisions in planning and control function:

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Strategy Formulation

Management Control

Task Control

Enter a new business Expand a plant Schedule production

Change debt to equity ratio

Issue new debt Manage cash flows

Add direct mail selling Determine advertising budget

Book TV commercials

Decide magnitude and direction of research

Control of research organization

Run individual research project

Acquire an unrelated business

Introduce new product or brand within product line

Coordinate order entry